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29) Developing nations currently account for ________ of FDI in the form of cross-border
mergers and acquisitions.
A) well over half
B) about one-third or less
C) about 50 percent
D) the largest share
30) Since World War II, the largest source country for FDI has been
A) China.
B) Japan.
C) the United States.
D) the Netherlands.
31) Which of the following factors has had a positive effect on the volume of foreign trade
investments?
A) emerging social democracies
B) fluctuating current rates
C) aging demographics
D) world economy globalization
32) What has made the United States an attractive target for foreign direct investment?
A) its unstable economy
B) its unfavorable political environment
C) its wealthy domestic markets
D) its closed society
33) The stock of FDI refers to the
A) amount of FDI undertaken over a given period of time.
B) total accumulated value of foreign-owned assets at a given time.
C) flow of FDI out of a country.
D) amount of foreign direct investment made by domestic companies over a given period of time.
34) The ________ of FDI refers to the amount of FDI undertaken over a year.
A) stock
B) net value
C) accumulated value
D) flow
35) What is the primary reason Africa has attracted FDI in recent years?
A) growth of the services sector
B) complete deregulation of markets
C) wave of privatization
D) raw material availability
36) What primarily explains why developing nations are characterized by a lower percentage of
cross-border mergers and acquisitions compared to developed nations?
A) fewer target firms to acquire in developing nations
B) fierce opposition to mergers and acquisitions in developed nations
C) unwillingness of foreign companies to invest in developing nations
D) presence of import quotas in developing nations
37) When contemplating FDI, why do firms apparently prefer to acquire existing assets rather than
undertake greenfield investments?
A) Greenfield investments are characterized by reduced management control.
B) Mergers and acquisitions are preferred because most greenfield investments fail.
C) It is easier and less risky for a firm to build strategic assets than acquire similar assets.
D) Mergers and acquisitions are quicker to execute than greenfield investments.
38) ________ arises when two or more enterprises encounter each other in different regional
markets, national markets, or industries.
A) Comparative advantage
B) Multipoint competition
C) Competitive advantage
D) Economic advantage
39) ________ arise(s) from using resource endowments or assets that are tied to a particular
foreign location and that a firm finds valuable to combine with its own unique assets.
A) Multipoint competition
B) The eclectic paradigm
C) Location-specific advantages
D) Outflow of FDI
40) ________ occurs when a firm legally allows the right to produce its product, to use its
production processes, or to use its brand name or trademark to another firm.
A) Licensing
B) Acquisition
C) Internalization
D) Merger
41) Which branch of economic theory seeks to explain why firms often prefer foreign direct
investment over licensing as a strategy for entering foreign markets?
A) internalization theory
B) product life-cycle theory
C) multipoint competition theory
D) strategic behavior theory
42) A French wind power company gives an Indonesian company the right to produce and sell
wind turbines in return for a royalty fee on every unit sold. Which business practice is this an
example of?
A) acquisition
B) licensing
C) exporting
D) greenfield investment
43) When transportation costs are added to production costs, it becomes unprofitable to ship some
products over a large distance. This is particularly true of products that
A) have a low value-to-weight ratio.
B) have a high value-to-weight ratio.
C) can be produced only in one region.
D) require locally sourced raw materials.
44) ________ seeks to explain why firms often prefer foreign direct investment over licensing as a
strategy for entering foreign markets.
A) Knickerbocker's theory
B) Internalization theory
C) The noninterventionist theory
D) The eclectic paradigm
45) ________ gives a firm tight control over manufacturing, marketing, and strategy in a foreign
country that may be required to maximize its profitability.
A) Licensing
B) Internalization
C) Foreign direct investment
D) A merger
46) ________ and its extensions can help to explain imitative FDI behavior by firms in
oligopolistic industries.
A) Internalization theory
B) The eclectic paradigm
C) The noninterventionist theory
D) Knickerbocker's theory
47) Which of the following specifically reduces the viability of an exporting strategy specifically
for products with low value-to-weight ratios?
A) foreign exchange controls
B) trade barriers
C) transportation costs
D) output quality
48) Which of the following is a way in which governments increase the attractiveness of FDI and
licensing relative to exporting?
A) by implementing import quotas
B) by imposing FDI limits in industries
C) by increasing tax rates
D) by limiting free flow of capital
